Volvo, long known for making ultrasafe, premium cars of spare Scandinavian design, said Wednesday all of its models released after 2019 will either be electric or hybrids, a first among major global automakers and a move that could roil the Twin Cities auto market, one of the brand’s largest in the U.S.
Most major car companies offer battery-powered or hybrid cars, but none have completely abandoned cars that rely solely on gasoline or diesel fuel.
The Sweden-based company will continue to produce pure combustion-engine models launched before 2019, such as today’s S60 sedan and XC90 SUV. But the shift is another signal that the end of the traditional combustion car engine might be coming.
“This means that there will, in future, be no Volvo cars without an electric motor,” Volvo Cars Chief Executive Hakan Samuelsson said in Stockholm. Volvo has five new models scheduled to launch between 2019 and 2021, all fully electric.
“People here will respond nicely to the change,” said Kjell Bergh, chief executive of Borton Volvo in Golden Valley, which started in the 1950s and is one of the five oldest Volvo dealerships in the U.S.
“If the pricing is right, I think it will be attractive,” he said.
Borton and Kline Volvo in Maplewood — the brand’s two dealers in the Twin Cities — combined to sell about 950 vehicles last year, a 25 percent jump that outpaced the brand's 18 percent gain nationally.
“In Minnesota, we historically outperform the national [market share of Volvo cars] by a large margin,” Bergh said.
Bergh, who has been at Bolton Volvo for 50 years, attributed the uptick to the release of a new XC90 model, its large SUV that had not been redesigned in years.
Grant Lohre, the new-car sales manager at Kline, said the strategic shift should appeal to the affinity that many Minnesotans have to “go green” and cut down on carbon emissions.
“I think it’s going to be a huge help,” Lohre said. “If you are not headed in that direction of electric vehicles you’re going to be way behind in five years. Volvo has been on the forefront of that and steps ahead of other manufacturers, so that’s going to be a huge advantage come 2019.”
Globally, Volvo has undergone a resurgence since it was purchased by Geely Automobile Holdings of China from Ford Motor Co. in 2010. The brand’s unit sales surpassed 500,000 globally for the first time in 2015 and climbed 6 percent last year to 534,000, a record. The company will open a U.S. assembly plant next year near Charleston, S.C., its sixth globally after three in China and two in Europe.
The electric-powered cars will be first produced in China, then at its European plants and then in Charleston.
Being the first to change strategy is challenging for any business, but particularly in the auto industry because product cycles are long and capital spending is high. Eventually, all automakers are expected to shift to electric vehicles when costs reach a point where they are less expensive to make than conventional ones.
But at the moment, sales in the U.S. have surged for SUVs and pickup trucks, due to low gas prices. Just 2 percent of passenger car sales in the U.S. last year were hybrids, which combine battery power and gasoline. That number has been declining because of falling gas prices.
But gas prices won’t be that low forever, Bergh said, and he expects a surge is on the horizon in electric and hybrid cars.
He added that Minnesotans may embrace the change more quickly than drivers in neighboring states that tend to be more conservative in politics and consumer behavior, such as Nebraska and Iowa. He noted that in Norway, his home country, nearly half of new-car sales are now electrics or hybrids.
As an indication of where investors think the auto industry is headed, Tesla, the upstart California-based maker of all-electric cars, has surpassed Ford and General Motors in stock market value, despite making significantly fewer cars.
Major U.S. automakers are pursuing the transition to electric vehicles at a slower pace than Tesla and now Volvo.
The Chevrolet Bolt, a battery-powered model, was introduced this year by General Motors, the second in the company’s biggest brand line.
Ford has sold hybrid versions of many models, but it has not yet developed an all-electric vehicle. Ford has said it will introduce a battery-powered SUV by 2020 and additional models after.
Fiat Chrysler has yet to announce any plans to build a new electric-only model. The company currently sells a hybrid version of its Chrysler Pacifica minivan and an electric variation of its Fiat 500 subcompact car.